The Softbank Group Corp. has opted to shun a previous plan to invest $16 billion in WeWork, and is now opting to go ahead with a smaller deal in the region of $2 billion.
Many experts believe that stock market fluctuations and turbulence, alongside raised concerns from investment partners, are the main reasons why Softbank is now offering a slashed deal to the shared office space provider.
New Deal Announcement Coming Soon?
The rumors are that Softbank and WeWork will make an announcement on Tuesday to roll out the details of the new deal.
Although the deal is reported to be worth $2 billion, which is a stark contrast to the previously suggested $16 billion, it’s still great news for WeWork, who is currently valued at approximately $36 billion. Softbank is already a large investor in WeWork, recently committing more than $8 billion.
The previously proposed $16 billion deal would have been one of the largest investments of all time for a tech startup that is privately owned. The plan was that Softbank would use $10 billion to buy out existing investors and use the remaining $6 billion as capital for the next few years. However, everything has now changed.
Reasons for the Backtracking?
The main players from Softbank and WeWork had been in heavy discussion since the end of December and are poised to announce the new deal.
Although there has been no confirmation why the new deal has been heavily slashed, many are citing the current woes of stock market prices are the main issue. And although we have seen some minor gains on the Dow Jones Industrial Average this week, the overriding feeling is one of uncertainty.
Softbank shares have also taken a hit in recent times, falling 33% in the past three months alone. They have also encountered a few trading problems with their newly-listed Japanese mobile phone company that previously raised investment in the region of $23 billion.
However, to put the whole WeWork saga into perspective, if Softbank does announce the latest $2 billion deal in the coming days, that is still a combined total of $10 billion they have invested in the shared world space company, so it’s hardly a flipflop on their part.
The investment from Softbank will still be enough to accelerate WeWork’s expansion plans and will help to fuel new initiatives planned by the company such as WeLive business-style hotel projects, so it’s not all doom and gloom.
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